FATHER TODD: Why do good people act immorally?

Fraud and moneymaking scams are common today – the Enron crisis, the Bernie Madoff Ponzi scheme, the subprime mortgage crisis to name a few. In the face of these scandals, psychologists and economists have been slowly rethinking the cause of unethical and immoral behavior.

Usually, when we think about bad behavior, we think about evil people. Bad people do bad things. However, that model, researchers say, is profoundly inadequate. On May 1, National Public Radio ran a story about Toby Groves on its “All Things Considered.” You can hear or read the entire story on npr.org: Psychology of Fraud – Why Good People Do Bad Things.

Toby grew up on a farm in Ohio. As a kid, developing a strong moral character was important to him. When he was around 20, he saw his father outside on the ground. When he ran out to see what was happening, his father showed him the headlines of the newspaper. His brother was sentenced to jail for fraud. He then promised his father he would never do anything like that.

Twenty-two years after Toby’s promise to his father, he was standing in front of the same judge who had sentenced his brother. He was sentenced for the exact same crime: fraud. This was not petty fraud. This was a massive bank fraud involving millions of dollars that drove several companies out of business and resulted in the loss of about a 100 jobs.

In 2008, Toby went to prison, trying to understand what had happened. Was he a bad person? Was this genetic? What causes his unethical behavior?

Researchers have been asking similar questions. They have been particularly interested in how our brains process information when we make decisions. What these researchers have concluded is that most of us can behave in profoundly unethical and immoral ways. Without realizing it, we can slide into an unethical mode.

A couple of years after Toby graduated from college, he decided to start his own mortgage loan company. With that promise to his father fresh on his mind, Toby lied. He told the bank that he was making $350,000, when in reality he was making nowhere near that.

This unethical act opened the door to all the other unethical acts. Toby stood with his heartbroken father and pledged to behave ethically. Anyone involved in the mortgage business knows that lying on a mortgage application is both unethical and illegal. How could that promise be so easily broken?

Ann Tenbrunsel, a researcher at Notre Dame, says we have to consider what this looks like from Toby’s perspective. “His sole focus was on making the best business decision” which made him blind to the ethics.

How did a lie on a mortgage application balloon into a $7 million fraud? In the weeks after his initial lie, he discovered huge losses at his company. Toby had already mortgaged his house. He didn’t have any more money, but he needed to save his business.

The easiest way for him to cover the mounting losses, he reasoned, was to get more loans. So he took out a series of false loans – loans on houses that didn’t exist. This means fabricating borrowers and homes and the paperwork to go with them.

He needed help from his staff who knew how loan documents should look and how to fake them. One by one Toby pulled employees into a room. Toby said, “Everyone said, ‘OK, we’re in trouble, we need to solve this. I’ll help you.'” No one said “no.”

Human beings commit fraud because human beings like each other. We like to help each other, especially people with whom we identify. When we are helping people, we don’t see what we are doing as unethical or immoral.

One unethical act can lead to another. Don’t let personal relationships get in the way of doing what is right and just.